In a July 18, 2018, research note, analyst Jason McCarthy reported that Maxim Group raised its price target on Buy-rated Mesoblast Ltd. (MESO:NASDAQ; MSB:ASX) following its recent partnership with a Chinese pharmaceutical company. The new target price, $16 per share, up from $14, compares to $6.62 per share, where Mesoblast's stock is currently trading.
The partnership between Mesoblast and Tasly Pharmaceutical Group concerns the former's mesenchymal precursor cell (MPC) assets, MPC-150-IM, in chronic heart failure, and MPC-25-IC, in acute myocardial infarction. "The companies plan to leverage each other's clinical data in China and the United States to support potential regulatory submissions," McCarthy relayed. "Phase 3 data sets from ex-China trials could potentially be used to support registration in China."
Under the agreement, McCarthy noted, Mesoblast will get $40 million in cash on closing, a 50/50 upfront and equity investment along with milestones and royalties from Tasly. For instance, Mesoblast will receive $25 million when products are approved in China along with double-digit, increasing royalties on net product sales. It will also get a milestone payment when each of six specific sales targets in China is reached.
Tasly will receive from Mesoblast the exclusive rights to its MPC candidates. The Asian firm will fund all related development, manufacturing and commercialization activities in China.
The analyst highlighted that the large size of the cardiovascular market in China represents a significant opportunity for Mesoblast and Tasly. For instance, 17% of the 1.3 billion people there have cardiovascular disease. About 500,000 individuals per year experience cardiac arrest, presumably due to various factors, including substandard air quality, great incidence of smoking, excessive salt intake and inactive lifestyles. "It's estimated that the cardiovascular disease drug market in China will rise to $45 billion in 2018," McCarthy added.
He concluded the report by pointing out that the Mesoblast-Tasly partnership provides the Australia-based firm with the chance to commercialize its products in the Asian country. Also, it extends Mesoblast's cash runway beyond a year, into H2/19, and through various catalysts, including graft versus host disease, degenerative disc disease, heart failure and rheumatoid arthritis. It further validates the MPC platform, specifically ahead of data expected in H2/18 from the Phase 2b trial in late-stage heart failure. "Mesoblast lands a great partner in China with favorable terms which have multiple positive aspects for the company," wrote McCarthy.
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Disclosures from Maxim Group, Mesoblast Ltd., July 18, 2018
I, Jason McCarthy, Ph.D., attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report.
I, Caroline Palomeque, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report.
The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firm's total revenues, a portion of which is generated by investment banking activities.
Maxim Group makes a market in Mesoblast Ltd.
Maxim Group received compensation for investment banking services from Mesoblast Ltd in the past 12 months.
Maxim Group expects to receive or intends to seek compensation for investment banking services from Mesoblast Ltd. in the next 3 months.
